>Why would promotional discounts be different? There are several differences between Groupon's model and standard discounting/advertising. The spirit of these

>Why would promotional discounts be different? There are several differences between Groupon's model and standard discounting/advertising. The spirit of these can primarily be summed up as "most advertising services don't compete directly on price with the clients for whom they are supposedly advertising." Groupon's product was its discounts, which it sourced from local merchants, then sold to its own customers. The businesses were not so much customers, but suppliers. However, the businesses paid Groupon for the benefit of supplying the product (the discount), and yet competed directly with Groupon when Groupon sold discounts for the restaurant across the street the following week. Now, here I have discounted deeply and taken a loss, however, I cannot compete with Groupon in my efforts to retain any new customers and recoup those losses. This is because Groupon encourages a certain customer mindset, based on demand for deep discounts. This is a demand which Groupon alone can endlessly satisfy because no individual competitor could sustain such losses. However, the aggregate loss of those businesses is the very source of Groupon's profit. In short, Groupon was actually a hyper-competitor to the businesses it was supposedly serving.